By Adam Haigh
July 28 (Bloomberg) -- Most U.K. shares declined after the Financial Mail said Royal Bank of Scotland Group Plc may abandon the sale of its U.K. insurance division and Ryanair Holdings Plc reported profit that missed analysts' estimates.
Royal Bank of Scotland retreated. British Airways Plc and EasyJet Plc dropped after Ryanair said profit fell 85 percent because of increased fuel expenses.
Losses on the benchmark FTSE 100 Index were limited by mining companies as BHP Billiton Ltd. and Rio Tinto Group, which account for more than 6 percent of the measure, followed metal prices higher.
The FTSE 100 declined 1.7, or less than 0.1 percent, to 5,350.9 at 9:19 a.m. in London as two stocks retreated for every one that rose. The index earlier fell as much as 0.6 percent. The FTSE All-Share Index dropped 0.1 percent and Ireland's ISEQ Index decreased 2.3 percent.
``We are very underweight banks,'' Alex Crooke, who manages $1 billion as a fund manager at Henderson Global Investors in London, said in a Bloomberg Television interview. ``I've never made money in airlines. I've learnt over the years not to touch them. They are going to have to cut their 2008 summer schedules. They will struggle to grow. It's too early'' to buy British Airways or EasyJet.
Royal Bank lost 2.2 percent to 210.25 pence. The U.K.'s second-biggest bank may abandon the sale because of waning interest from buyers, the Financial Mail said, without saying where it got the information.
Carolyn McAdam, head of group communications, declined to comment when contacted by telephone.
Ryanair Slumps
Ryanair, Europe's biggest discount airline, slumped the most since January 2004, down 17 percent to 2.66 euros in Dublin. The company said it may post its first full-year loss since going public in 1997.
British Airways Plc dropped 5.2 percent to 234 pence. Four current and former executives of Europe's third-largest airline will be charged with price fixing by the U.K.'s Office of Fair Trading, the Financial Times reported, without citing anyone.
BA spokeswoman Laura Goodes and Corinne Gladstone, a spokeswoman at the Office of Fair Trading, declined to comment when reached by Bloomberg News.
EasyJet, Europe's second-biggest discount airline, lost 9 percent to 304.75 pence.
Sage Group Plc, the U.K.'s largest software maker, eased 1.6 percent to 197.8 pence. JPMorgan Chase & Co. downgraded the shares to ``underweight'' from ``neutral.''
BHP Billiton, the world's largest mining company, added 3 percent to 1,600 pence, while Rio Tinto, the third biggest, gained 2 percent to 5,052 pence. Copper, tin and nickel prices rose in London.
Unilever, the world's second-biggest consumer-products company, added 1.6 percent to 1,486 after agreeing to sell its laundry business in North America to Vestar Capital Partners for $1.45 billion.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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Monday, July 28, 2008
European Stocks, U.S. Futures Fall; Banks, Airlines Lead Drop
By Sarah Thompson
July 28 (Bloomberg) -- European stocks and U.S. index futures fell as concern deepened credit losses and the economic slowdown will hurt earnings. Most Asian shares advanced.
HBOS Plc and Deutsche Bank AG retreated after Australia & New Zealand Banking Group Ltd. forecast its steepest full-year profit drop since 1992 as bad loans swell. Australia's fourth-biggest bank tumbled the most since 1987, while JPMorgan Chase & Co. fell in Germany. Ryanair Holdings Plc, Europe's largest discount airline, slumped 15 percent after saying it may post its first full-year loss since going public in 1997 on higher fuel costs. British Airways Plc and Deutsche Lufthansa AG also declined.
``If you're looking for good news from the banking sector I suggest you go on holiday because it is just not going to be there,'' Howard Wheeldon, senior strategist at BGC Partners LP in London, said in a Bloomberg Television interview.
Europe's Dow Jones Stoxx 600 Index slipped 0.8 percent to 279.56 at 10:58 a.m. in London, while futures on the Standard & Poor's 500 Index sank less than 0.2 percent. The MSCI Asia Pacific Index increased less than 0.1 percent, with three stocks advancing for every two that fell as gains by commodity producers countered declines among banks.
Financial stocks have led a rout that has erased more than $11 trillion from global equities as more than $460 billion in credit-related losses and accelerating inflation hurt the outlook for economic and profit growth.
Analysts estimate earnings for companies in the Stoxx 600 will fall 2.6 percent in 2008, Bloomberg data show. That's down from 11 percent growth predicted at the start of the year.
Profit at S&P 500 companies sank 16 percent in the second quarter, the fourth straight decline, according to analysts' estimates. That would be the longest streak in six years, Bloomberg data show.
Bear Markets
Of the 63 S&P 500 companies that have provided outlooks this quarter, 30 said profits will fall, Bloomberg data show.
All of the 23 developed nations in the MSCI World Index except for Canada have experienced bear-market plunges of 20 percent or more since September as credit losses surged and record commodity prices stoked inflation.
HBOS, the U.K.'s largest mortgage lender, slid 5.1 percent to 294.5 pence. Deutsche Bank, Germany's biggest bank, slipped 0.9 percent to 59.02 euros.
ANZ's earnings per share excluding income from derivatives trading will decline 20 percent to 25 percent in the 12 months to Sept. 30, the Melbourne-based company said. Chief Executive Officer Mike Smith, who joined ANZ bank from HSBC Holdings Plc in October, said the company tripled provisions for delinquent loans from a year earlier.
ANZ dropped 11 percent to A$15.81.
`Looking Sick'
Commonwealth Bank of Australia, the nation's largest lender, slumped 5 percent to A$41.10.
JPMorgan, the second-largest U.S. bank by market value, slipped 10 cents to $39.42 in Germany.
``The banking sector is looking sick across the board and ANZ's forecast serves to highlight this,'' said Oliver Stevens, head of dealing at IG Markets in Melbourne.
Royal Bank of Scotland Group Plc, the U.K.'s-second biggest bank, dropped 2.1 percent to 210.5 pence. RBS may abandon the sale of its U.K. insurance division because of waning interest from buyers, the Financial Mail reported, without saying where it got the information.
Lloyds TSB Group Plc fell 23 percent to 323.75 pence after analysts at Cazenove said Britain's largest provider of checking accounts may slash its full-year dividend by as much as 40 percent as bad loans increase.
Long-Term Challenge
The bank faces a ``long-term challenge'' in maintaining its capital position because loan impairments are likely to rise over the next 12 months, wrote London-based analysts led by Simon Pilkington, who has an ``in-line'' rating on the stock. As a result, the bank may not be able to pay a dividend similar to the 39.5 pence a share it paid in 2007.
Ryanair sank 15 percent to 2.73 euros. Net income excluding writedowns fell 85 percent to 21 million euros ($33 million) in the three months ended June 30. Analysts had predicted profit of 50.9 million euros.
The carrier, struggling with record oil prices and a slowdown in consumer spending, expects an annual result of between breakeven and a loss of 60 million euros.
British Airways, Europe's third-largest airline, dropped 4.9 percent to 234.75 pence.
Lufthansa slid 1.8 percent to 15.17 euros. Europe's second- biggest airline's operations at Frankfurt and Hamburg face disruption today as its employees begin a walkout over pay.
TNT, Deutsche Post
TNT NV sank 8.7 percent to 21.89 euros after Europe's second-largest express-delivery company said second-quarter profit declined 16 percent, hurt by currency fluctuations and lower earnings at the mail division.
Net income fell to 205 million euros from 244 million a year earlier. Analysts surveyed by Bloomberg had expected 224 million euros.
Deutsche Post AG, Europe's biggest mail carrier, lost 1.4 percent to 15.69 euros.
Pearson Plc gained 3 percent to 613.5 pence. The publisher of the Financial Times newspaper said its first-half loss narrowed from a year earlier on a smaller deficit from discontinued operations.
Acambis Plc climbed 60 percent to 186 pence after Sanofi- Aventis SA agreed to buy the U.K. company for 276 million pounds ($549 million) in cash. Sanofi-Aventis, France's largest drugmaker, slipped 0.8 percent to 46.81 euros.
BHP Billiton Ltd., the world's largest mining company, increased 3.2 percent to 1,602. Cheuvreux raised its recommendation to ``outperform'' from `underperform'' before its full-year results on Aug. 18.
``We expect full-year earnings before interest, taxes, depreciation and amortization of $27.4 billion, with a strong outlook on metal demand and prices for 2009,'' the brokerage said in a note to clients.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net
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July 28 (Bloomberg) -- European stocks and U.S. index futures fell as concern deepened credit losses and the economic slowdown will hurt earnings. Most Asian shares advanced.
HBOS Plc and Deutsche Bank AG retreated after Australia & New Zealand Banking Group Ltd. forecast its steepest full-year profit drop since 1992 as bad loans swell. Australia's fourth-biggest bank tumbled the most since 1987, while JPMorgan Chase & Co. fell in Germany. Ryanair Holdings Plc, Europe's largest discount airline, slumped 15 percent after saying it may post its first full-year loss since going public in 1997 on higher fuel costs. British Airways Plc and Deutsche Lufthansa AG also declined.
``If you're looking for good news from the banking sector I suggest you go on holiday because it is just not going to be there,'' Howard Wheeldon, senior strategist at BGC Partners LP in London, said in a Bloomberg Television interview.
Europe's Dow Jones Stoxx 600 Index slipped 0.8 percent to 279.56 at 10:58 a.m. in London, while futures on the Standard & Poor's 500 Index sank less than 0.2 percent. The MSCI Asia Pacific Index increased less than 0.1 percent, with three stocks advancing for every two that fell as gains by commodity producers countered declines among banks.
Financial stocks have led a rout that has erased more than $11 trillion from global equities as more than $460 billion in credit-related losses and accelerating inflation hurt the outlook for economic and profit growth.
Analysts estimate earnings for companies in the Stoxx 600 will fall 2.6 percent in 2008, Bloomberg data show. That's down from 11 percent growth predicted at the start of the year.
Profit at S&P 500 companies sank 16 percent in the second quarter, the fourth straight decline, according to analysts' estimates. That would be the longest streak in six years, Bloomberg data show.
Bear Markets
Of the 63 S&P 500 companies that have provided outlooks this quarter, 30 said profits will fall, Bloomberg data show.
All of the 23 developed nations in the MSCI World Index except for Canada have experienced bear-market plunges of 20 percent or more since September as credit losses surged and record commodity prices stoked inflation.
HBOS, the U.K.'s largest mortgage lender, slid 5.1 percent to 294.5 pence. Deutsche Bank, Germany's biggest bank, slipped 0.9 percent to 59.02 euros.
ANZ's earnings per share excluding income from derivatives trading will decline 20 percent to 25 percent in the 12 months to Sept. 30, the Melbourne-based company said. Chief Executive Officer Mike Smith, who joined ANZ bank from HSBC Holdings Plc in October, said the company tripled provisions for delinquent loans from a year earlier.
ANZ dropped 11 percent to A$15.81.
`Looking Sick'
Commonwealth Bank of Australia, the nation's largest lender, slumped 5 percent to A$41.10.
JPMorgan, the second-largest U.S. bank by market value, slipped 10 cents to $39.42 in Germany.
``The banking sector is looking sick across the board and ANZ's forecast serves to highlight this,'' said Oliver Stevens, head of dealing at IG Markets in Melbourne.
Royal Bank of Scotland Group Plc, the U.K.'s-second biggest bank, dropped 2.1 percent to 210.5 pence. RBS may abandon the sale of its U.K. insurance division because of waning interest from buyers, the Financial Mail reported, without saying where it got the information.
Lloyds TSB Group Plc fell 23 percent to 323.75 pence after analysts at Cazenove said Britain's largest provider of checking accounts may slash its full-year dividend by as much as 40 percent as bad loans increase.
Long-Term Challenge
The bank faces a ``long-term challenge'' in maintaining its capital position because loan impairments are likely to rise over the next 12 months, wrote London-based analysts led by Simon Pilkington, who has an ``in-line'' rating on the stock. As a result, the bank may not be able to pay a dividend similar to the 39.5 pence a share it paid in 2007.
Ryanair sank 15 percent to 2.73 euros. Net income excluding writedowns fell 85 percent to 21 million euros ($33 million) in the three months ended June 30. Analysts had predicted profit of 50.9 million euros.
The carrier, struggling with record oil prices and a slowdown in consumer spending, expects an annual result of between breakeven and a loss of 60 million euros.
British Airways, Europe's third-largest airline, dropped 4.9 percent to 234.75 pence.
Lufthansa slid 1.8 percent to 15.17 euros. Europe's second- biggest airline's operations at Frankfurt and Hamburg face disruption today as its employees begin a walkout over pay.
TNT, Deutsche Post
TNT NV sank 8.7 percent to 21.89 euros after Europe's second-largest express-delivery company said second-quarter profit declined 16 percent, hurt by currency fluctuations and lower earnings at the mail division.
Net income fell to 205 million euros from 244 million a year earlier. Analysts surveyed by Bloomberg had expected 224 million euros.
Deutsche Post AG, Europe's biggest mail carrier, lost 1.4 percent to 15.69 euros.
Pearson Plc gained 3 percent to 613.5 pence. The publisher of the Financial Times newspaper said its first-half loss narrowed from a year earlier on a smaller deficit from discontinued operations.
Acambis Plc climbed 60 percent to 186 pence after Sanofi- Aventis SA agreed to buy the U.K. company for 276 million pounds ($549 million) in cash. Sanofi-Aventis, France's largest drugmaker, slipped 0.8 percent to 46.81 euros.
BHP Billiton Ltd., the world's largest mining company, increased 3.2 percent to 1,602. Cheuvreux raised its recommendation to ``outperform'' from `underperform'' before its full-year results on Aug. 18.
``We expect full-year earnings before interest, taxes, depreciation and amortization of $27.4 billion, with a strong outlook on metal demand and prices for 2009,'' the brokerage said in a note to clients.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net
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Euro Holds Its Own As German Sentiment Hits Lowest Level In 5 Years
| Daily Forex Fundamentals | Written by DailyFX | Jul 28 08 08:41 GMT | | |
| Talking Points
Euro Holds Its Own as German Sentiment Hits Lowest Level in 5 Years A relatively quiet start to trade this week as global calendar is virtually barren. The EURUSD traded on either side of 157.00 for most of the Asian and early European session, but took s small tumble after GFK consumer sentiment registered its worst reading in 5 years. GFK fell to 2.1 from 3.5 hitting lows not seen since 2003 as high oil prices, high interest rates and a slowdown in global demand depressed the region's consumers despite the near record value of currency exchange rates. The news suggests that the slowdown in US economy has now crossed the ocean and made its unwelcome presence felt on the other side of the Atlantic. Given the massive decline in European consumer sentiment, which is likely to cause a similar collapse in spending, it is difficult to imagine how the ECB would raise rates any further for the rest of this year. Nevertheless despite a slew of negative economic data over the past week, the EURUSD has managed to hold on to its gains to a remarkable degree as currency traders continue to view the unit as a safer alternative to the dollar. With the greenback clearly stabilized for now, the question forward is can its nascent the rally continue for another week? The answer as is so often the case may depend on the NFPs'. The front of the week may actually prove dollar positive as flash GDP for Q2 could show surprising strength of 2% versus only 1% the quarter prior. However, the labor data holds the key. If NFPs surprise to the downside, most importantly breaking the -100K barrier, dollar longs will be hard pressed to push the unit higher. Weakening labor markets will only convince the dollar bears that the worst for the US economy lies ahead. Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources. | |
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Today's Key Points
| Daily Forex Fundamentals | Written by Danske Bank | Jul 28 08 08:00 GMT | | |
Danske Daily
Markets OvernightThe main US equity indices managed to close with small gains in Friday's trade, with the S&P500 index up 0.4% and the Dow Jones index up 0.2% on the day. Although information technology and energy stocks helped the S&P500 index to pair Thursday's decline, energy stocks still suffered the biggest loss out of the ten industry groups in the index. Friday's economic data releases out of the US were generally supportive for equity markets, as all key numbers surprised on the upside. Firstly, durable goods orders showed a solid gain in June, indicating that the corporate non-financial sector remains in decent shape. Secondly, the University of Michigan confidence indicator for June rebounded nicely as both current conditions and expectations improved. Importantly, the report also showed that 5-yr inflation expectations declined to 3.2% from 3.4%, which could reduce concern among FOMC members about inflation risk. Finally, new home sales fared better than expected in June, and home sales in prior months were revised up by a net amount of +50K. US Treasuries sold off in Friday's trade, following decent gains the day before as yields on both two-year and ten-year notes rose more than 10bp. We have seen some improvement overnight, though, and yields have come down slightly. On the energy market, oil is trading close to a seven-week low, with the contract for September delivery hovering just above $123 per barrel, as both the OPEC and China are raising output. The price of oil dropped more than $5 per barrel last week and has come down close to 24 dollars from its record high a few weeks ago. In Asia, equity markets are trading slightly higher at the time of writing, as especially commodity producers have advanced. Financials have seen some pressure, though, after Australia's fourth-largest bank (the ANZ) forecast the biggest drop in profits since 1992, which caused the price of its shares to drop more than ten percent. On the FX market, there have only been small movements overnight. EUR/USD is trading in the 1.566-1.576 range, and USD/JPY is hovering at roughly 108. In Scandinavia, EUR/NOK is trading at around 8.08, while EUR/SEK has drifted slightly lower, trading at around 9.46. Global DailyThis week will start off relatively quiet, with the flow of data intensifying as the weekend approaches. Today's most important data is German Länder CPI for July, which will arrive this morning and will provide an important lead to the Euroland Flash CPI numbers due out later this week. In the evening, attention will turn to the US, where Federal Reserve Board Member Mishkin (voter, dove) is speaking. If Mishkin comments on the economic outlook or monetary policy, his assessment will probably be much more in line with Bernanke's Congressional testimony than the hawkish speeches delivered by some of the regional Fed Governors over the past few weeks. This could help to calm market fears of an early Fed hike. This week's main events will be the Euroland Flash CPI on Thursday, when US Q2 GDP is scheduled as well. On Friday, the dataflow peaks with July non-farm payrolls and ISM manufacturing. Our estimate does not differ significantly from the consensus view, although it is slightly lower. In any case, this week's forward-looking US data should serve as a reminder that growth prospects remain relatively gloomy. Furthermore, the downward trend in commodity prices over the past couple of weeks seems to persist. This combo could add some downside to bond yields - particularly the short end in Europe - if global risk appetite fails to improve much this week. Fundamentally, we still favour steeper curves and lower bond yields in both Euroland and the US on a 3- 6 months' horizon. Danske Bank Disclaimer This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets' research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission. | |
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Dollar Trades On A High After Bad German News
| Daily Forex Fundamentals | Written by Finotec Group | Jul 28 08 09:15 GMT | | ||||||||||||||||||||||||||||||||||||
| The greenback traded near a one-month high against the yen after Congress passed legislation to prop up Fannie Mae and Freddie Mac, the two largest providers of U.S. mortgage financing. The currency was also near a three-week high versus the euro on speculation a government report this week will show the U.S. economy expanded last quarter at more than twice the annual pace of the prior three months. The U.S. Congress sent to the president legislation to stem foreclosures for 400,000 homeowners and aid Fannie Mae and Freddie Mac its most sweeping effort to halt the biggest housing slump since the Great Depression in the 1930s. President George W. Bush will sign the measure into law, a spokesman said. The dollar rose to a high of 108.10 yen, the highest level since June 26, now currently trading at 107.69 yen as of 7:42 am, GMT. German consumer confidence fell to the lowest in more than five years as rocketing energy prices sapped purchasing power and the economic outlook deteriorated. Record oil and food prices pushed inflation in Germany to 3.4 percent last month, squeezing disposable incomes just as the euro's gains and a deepening U.S. housing slump curbed demand for exports. Business confidence fell the most since the Sept. 11 when investor confidence dropped to a record, signs growth is faltering in Europe's biggest economy. 'Along with fears of high inflation, many Germans are concerned that there will be a more marked cooling of the economy than previously anticipated,' GfK said. 'News from the U.S. of the continuing gloom in the financial markets support these assumptions and not least, the continuing high value of the euro represents a hazard to exports.' The EUR/USD is currently trading at 1.5706 as of 7:46 am, GMT. The sterling fell against the euro and the dollar after a private report showed U.K. house values dropped in July by the most in at least seven years. 'This is more bad news coming out of the housing market and adds to the growing sense the economy is slowing,' said Grant Lewis, the London-based head of fixed-income research at Daiwa Securities SMBC Europe Ltd. 'That puts a bit of downward pressure on sterling given the expectation of rate cuts.' The average cost of a residential property in England and Wales slipped 4.4 percent from a year earlier, Hometrack Ltd., a London-based research company, said today in a statement. That's the biggest annual drop since the index started seven years ago. Prices fell 1.2 percent from June. The GBP/USD is currently trading at 1.9849 as of 7:53 am, GMT Economic Calendar
Finotec Group Inc. Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein. | ||||||||||||||||||||||||||||||||||||
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Daily Report: Markets in Tight Range
| Market Overview | Written by ActionForex.com | Jul 28 08 07:14 GMT | | |
| Markets are staying in tight range today so far and in view of a very light economic calendar, will probably stay so. Dollar edges higher against the yen earlier today but lacks follow through buying. Yen, on the other hand, regains some ground but remains generally pressured. Euro showed little reaction after Germany Gfk consumer confidence dropped to five year low of 2.1 and remains in tight range. Sterling is mildly lower after Hometrack said UK house prices fell the most since 2001 in Jul. The overall technical picture in dollar is still mixed. On the one hand, EUR/USD and GBP/USD are still holding above key near term support level. So is sharply sold off AUD/USD. There is no confirmation of trend reversal in these pair yet and dollar could reverse any time from the current level. On the other hand, outlook in USD/JPY, USD/CHF and USD/CAD are all suggesting that more upside to come. Markets will probably wait for Q2 GDP and NFP from US later this week before committing further. USD/JPY Daily OutlookDaily Pivots: (S1) 106.98; (P) 107.46; (R1) 108.33; More. USD/JPY edges higher to 108.07 earlier today but lacks following through buying so far. Though, intraday bias remains on the upside as long as 107.15 minor support holds. Further rally is still expected to test 108.58/59 resistance first. On the downside,below 107.15 will turn intraday outlook neutral first. But still, downside is expected to be contained by 106.04 support and bring rally resumption. In the bigger picture, USD/JPY has made a medium term bottom after down trend from 124.13 has just met 76.4% retracement of 79.75 to 147.68 at 95.78. Corrective nature of the fall from 108.58 to 103.76 indicates that medium term rebound from 95.77 is still in progress. Firm break of 108.59 key medium term resistance will confirm such rally has resumed for 61.8% projection of 95.77 to 108.58 from 103.76 at 111.68 first. On the downside, while another fall could still be seen if consolidation from 108.58 extends further, rally from 95.77 should still be in force and expected to extend high as long as 102.73 support holds. | |
Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 22:45 | NZD | New Zealand Trade balance (nzd) Jun | -223M | -350.0M | -195.8M | |
| 22:45 | NZD | New Zealand Imports Jun | 3.81B | 3.70B | 3.92B | |
| 22:45 | NZD | New Zealand Exports Jun | 3.59B | 3.35B | 3.73B | |
| 6:00 | EUR | Germany Gfk Consumer Confidence Aug | 2.1 | 3.5 | 3.9 | |
| 16:00 | USD | FED Mishkin Speaks |
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Daily Financial Market Outlook
| Daily Forex Fundamentals | Written by Lloyds TSB | Jul 28 08 07:37 GMT | | |
| Overview & economic commentary The health of the US economy will be under close scrutiny this week, with the publication of preliminary Q2 gdp and the July employment report. An upward revision to consumer confidence data and strong gains in durable goods orders in June helped to allay some concerns last week on the state of the real economy, even though high levels of housing inventories mean a recovery in residential construction is still some way off. However, solid growth in US exports and the tax cut for consumers suggest the US economy probably expanded at least twice as fast in Q2 as in Q1. The upward trend in weekly initial claims tells a more sobering story of ongoing job cuts by US companies at the start of the second half of the year. Weekly claims jumped back above 400,000 last week and point to some deepening of labour market woes. Given the precarious US housing and mortgage market environment, we do not believe that this week's data will tip the balance in favour of a change in US interest rates at the FOMC meeting next week. House prices, consumer and manufacturing confidence are due in the UK this week and will help markets to judge whether economic growth can stabilise in Q3 following the slowdown to just 0.2% q/q in Q2. The CBI distributive trades survey is the first anecdotal evidence of high street spending in July and will indicate whether retail sales can rebound from the 3.9% slump in June. Inflation data in the euro zone is forecast to show a rise in annual CPI above 4% in July. Currency commentary Releases of US Q2 gdp and non-farm payrolls will shed some light on the economy. Our view is that fed funds will stay at 2.0% this year. The dollar struggled to make the most of the fall in crude oil prices below $125pb last week, as market participants continue to harbour doubts about a normalisation in credit and mortgage markets. UK banks start reporting Q2 results this week and this could have some bearing over the direction of sterling. The performance of sterling and banking stocks has been closely correlated lately so any surprises from the banks may well have an impact on global investor appetite for the pound. US Fed voter Mishkin is scheduled to speak today and will present his latest views before the FOMC meeting next week. Antipodean currencies are under pressure as the week gets underway as participants await the outcome of Australian retail sales. The Brazilian real extended gains last week after the central bank hiked interest rates. £/real has threatened to break key 3.12 support. Major data and events today Today
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Friday
Chart of the day: Is the boom in commodity prices over? Lloyds TSB Bank Disclaimer: Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business. | |
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Forex Market Issues and Risks
| Daily Forex Fundamentals | Written by AC-Markets | Jul 28 08 07:46 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Market is looking for direction with lower Crude Oil and better US data News and Events:The dollar rose to a one-month high above 108.00 yen on Monday, riding on the momentum gained from better-than-expected US indicators released late last week. Upbeat readings on US durable goods orders, new home sales and consumer sentiment released last Friday buoyed the Dollar by lifting some of the gloom over the US economy. US durable goods orders were up 0.8% in June from a revised 0.1% in May. New home sales fell to a 530k annual pace last month against market expectations for a drop to 500k. Consumer sentiment recovered unexpectedly in July after falling in June to the lowest level since 1980. The slide in crude oil prices also supported the greenback. More good news on the mortgage sector came after US Senate voted on Friday to limit debate on a bill aimed at shoring up both Fannie May and Freddie Mac, paving the way for a final vote on Saturday. On Friday, UsdJpy rose to 107.96 high before ending at 107.84 up 0.5%. EurUsd rose 0.11% to 1.5704. UsdChf rose 0.05% to 1.0363. GbpUsd was 0.18% lower at 1.9879 As a near-term incentive, traders are eyeing the direction of crude oil prices, which have dropped recently and helped underpin the Dollar, and US non-farms payrolls data, which is due on Friday. European corporate earnings due this week may provide some direction to the Market, traders said. Today Key Issues:
The Risk Today:EurUsd Market broke on Wednesday 1.5800 support which lightly undermine the current 3-month uptrend. Further weakness might play in 1.5400 - 1.5800 consolidation range. Below, strong support holds 1.5304 13th June low. Key initial resistance holds 1.6000. A break up there would open the way to Trendline resistance 1.6200. GbpUsd Cable is set in short term 1.9800 - 2.0100 trading range. It hit 2.0158 high two weeks ago. Key level holds again 2.0100. On the downside, only a return below 1.9649 might bring again focus on 1.9337 January low and 1.9105 (50% retracement of 1.7049 - 2.1162 advance). Initial support holds 1.9649 July 7th low. Strong support holds 1.9363 20th February and 14th May low. UsdJpy Last week recover pushed the market to 108. Friday strong Dollar rebound put focus on mid-June 108.59 resistance and 110.10 strong resistance (Trendline). Further advance would open the way toward 111.92 early January high. On the downside, a return below 105 may open the way toward 102.73 support and 100 pivot point. UsdChf Recent Dollar strength pushed last week over 1.0200 and is now trading near 1.0400. This is reopening the view for a 1.0200 - 1.0600 consolidation range. Initial resistance holds 1.0408 last week high. Renewed weakness below 1.0200 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low.
Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Forex Technical Analysis
| Daily Forex Technicals | Written by DeltaStock Inc. | Jul 28 08 09:09 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||
EUR/USDCurrent level-1.5723 EUR/USD is in an uptrend from recent bottom at 1.5301, that was the final of the prolonged consolidation since 1.5909 (17 March 2008). Technical indicators are slowly rising and trading is situated above the 50- and 200-Day SMA, currently projected at 1.5677 and 1.5181. As expected the pair founded support at 1.5627 and reversed, climbing back again above 1.5712. We think, that last week's bottom was a final of the slide from 1.5946 and currently a corrective phase is underway, targeting 1.5798. Intraday be careful around 1.5685, cause there is still a risk for one more dip to 1.5649 before challenging 1.5798. Today's strategy: Keep trading the 1.5628 - 1.5798 range.
USD/JPYCurrent level - 107.68 The pair has finalized its corrective uptrend from 95.75 mid-term bottom with the recent top at 108.59. Trading is situated below the 50- and 200-day SMA, currently projected at 105.81 and 107.25. Although the pair has spiked high few pips above 107.98, we still think, that this was a part of the consolidation since 24 July 2008 and one more leg downwards is needed to complete the corrective pattern and to initiate a rise towards 108.59 and probably 109.36. Intraday a minor downtrend is on the run, targeting 107.38 and 107.09, with a crucial resistance at 107.87. Today's strategy: Sell for 107.38, stop above 107.87. If stop taken, reverse for 108.59 with a risk limit below intraday low.
GBP/USDCurrent level- 1.9865
Our target at 1.9826 has been met, so now the consolidation phase from 2.0153 has fulfilled its price requirements and after breaking above 2.0029 the road to 2.0274 will be cleared. Nevertheless, trading is still range-bounded and the senior downtrend from 2.0153 is still intact. Today's strategy : Buy on a break above 1.9912, stop below intraday low, target seen around 2.0001.
DeltaStock Inc. - Online Forex & Securities Broker RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice. | |||||||||||||||||||||||||||||||||||||||||||||||||
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Currency Pair Daily Forecasts
| Daily Forex Technicals | Written by Finotec Group | Jul 28 08 09:26 GMT | | |
EUR/USD Daily Technical ReportsEUR/USD-market strategy can be a buy from the level 1.5728$ Technical oscillators supporting the bullish trend for the currency pair To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines in a bullish direction and crossing below the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bullish direction. Also, MA oscillators indicate a bullish cross on the short MA line. As seen on the chart there are two bottoms leading upwards to a buying trend. USD/JPY Daily Technical ReportsUSD/JPY-market strategy can be a buy from the level 107.40 Technical oscillators supporting the bullish trend for the currency pair To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines after a bullish crossover above the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bullish direction. Also, MA oscillators indicate a bullish cross on the short MA line. As seen on the chart there are two bottoms leading upwards to a buying trend. GBP/USD Daily Technical ReportsGBP/USD-market strategy can be a sell from the level 1.9880$ Technical oscillators supporting the bearish trend for the currency pair To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines after a bearish crossover below the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bearish direction. Also, MA oscillators indicate a bearish cross on the short MA line. As seen on the chart there are two tops leading downwards to a selling trend USD/CHF Daily Technical ReportsUSD/CHF-market strategy can be a sell from the level 1.0300 Technical oscillators supporting the bearish trend for the currency pair To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines in a bearish direction above the zero line and have crossed indicating the pair may correct downwards. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bearish direction. Also, MA oscillators indicate a bearish cross on the short MA line. Finotec Group Inc. Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein. | |
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Technical Analysis Daily: GBP/USD
| Daily Forex Technicals | Written by iFOREX.bg | Jul 28 08 08:43 GMT | | |
GBP/USD 1.9842GBP/USD Open 1.9911 High 1.9976 Low 1.9840 Close 1.9883 The British Pound also climbed insignificantly on Friday against the US Dollar from Friday's bottom 1.9840 to the top 1.9976, which are the the first support and resistance levels respectively for the currency couple today. Today the GBP/USD appears to be moving neutrally within a range. If the positive trend continues, next resistance is expected at 2.0110, followed by 2.0200. In downward direction next support for today is expected at 1.9770, the break of which would lead to next target 1.9700. Technical resistance levels: 1.9975 2.0110 2.0200 Trading range: 1.9830 - 1.9905 Trend: Upward Buy at 1.9842 SL 1.9812 TP 1.9892 iFOREX.bg Forecasts and Trading Signals | |
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Daily Forex Analysis
Daily Forex Technicals | Written by FOREXYARD | Jul 28 08 08:56 GMT |
Headlines
Get Prepared For a Rough Ride Ahead of US Non-Farm Payrolls Week
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Headlines
Get Prepared For a Rough Ride Ahead of US Non-Farm Payrolls Week
Economic News
USD
Still Looking For Direction.
The USD had a solid trading session last week, as it appreciated versus all of its major currency rivals. The greenback saw substantial bullishness early in the week as Crude Oil prices continued to fall, and a string of hawkish testimony by US officials infused the growing dollar trend. Crude Oil could be labeled as the major reason for all market movement last week, as it continued into its second week of legitimate bearish trends as it dipped below $125/barrel. By Tuesday, following testimony in front of the Senate Banking Committee, by Treasury Secretary Paulson and FOMC Member Plosser, the dollar gained close to 250 points against the EUR, reaching a two-week high of 1.5627. Ultimately, the greenback range traded for the rest of week and closed last week's trading session at 1.5696 versus its European counterpart.
This week should be highly volatility for the greenback, as many crucial news events are expected to take place. On tap this week, Consumer Confidence, ADP NonFarm Employment Change, Crude Oil Inventories, GDP and Unemployment Claims will highlight the US news before Friday, when we can expect Non Farm Payrolls, the Unemployment Rate and ISM manufacturing figures. With a variety of forecasts expected for this week's news, Forex traders should also pay close attention to the movement of Crude Oil to dictate the pace of the greenback.
Investors should note that a fresh wave of IPO's are set to hit the US stock markets this week, which will likely drive the markets up. The correlation between the major stock markets and the dollar has grown over the last few weeks and could prove to be vital in mapping currency movement for the week.
Today, Federal Reserve Governor Frederic Mishkin is expected to speak in Washington D.C. This will be the sole event from the US for the day, and with little else surrounding it worldwide, expect the market to be calm today.
EUR
Will the European Fundamentals Force ECB to Cut Rates?
The Euro has experienced a big turn-around in the last 2 weeks, after reaching recording highs versus the USD and JPY. The Euro-Zone currency has lost ground since eclipsing record marks and has not been able to reverse trends since. The EUR lost close to 250 points against the USD and approximately 100 points versus the GBP before range trading for the rest of the week. As expected last week, news from the EZ contributed to even more bearish movement in the EUR as the previous week was highlighted by French Consumer Spending, German Ifo Business Expectations Index and Manufacturing PMI. These 2 nations, especially Germany, represent a benchmark for what is to come from the whole of the EZ economy.
This week, news from the European Economic Zone could surprise investors and reverse the current bearish move in the EUR. In a news week dominated by German economic data we will German Consumer Confidence, German Prelim CPI, German Retail Sales and German Unemployment Change. If forecasts stay in line with positive expectations it is hard to see how the Euro can't make up some ground, unless the Crude Oil continues to fall. France and Italy will also release some important material this week that could help solidify European economic news in general.
Today the EUR produced one event on the economic docket. The German Consumer Confidence had fallen this month and printed a lower than expected result of 2.1. In spite of this indicator investors will look toward the equity market and especially the price of Crude Oil since it happened to be the best indication to the direction of the European currency.
JPY
Carry Trades Are Still the Name Of The Game.
The Yen completed last week trading session with mixed results versus the major currencies. The Japanese currency when placed against the USD lost close to 100 points closing last weeks trading session at 107.87. The Yen versus the GBP lost about 110 points as the pair closed at 214.73. Last week, it was forecasted that several indicators including the Tokyo Core CPI, National Core CPI and CSPI would help move the JPY on its own; however a string of unchanged results left the JPY price movement in the hands of outside sources.
This week Japan will provide even more indicators to the economic calendar and will likely contribute to its currency volatility. The Retail Sales, Preliminary Industrial Production and Average Cash Earnings are all expected to see small losses, and along with bullish USD or EUR news could further reducing the much-needed points for the JPY.
Today, local Japanese data could contribute to JPY volatility as we expect Overall Household Spending, the Unemployment Rate and Retail Sales. Data is forecasted to be negative and will likely move the JPY in a bearish direction. Forex investors might consider going short against the JPY today.
Oil
Looking To Break 2 Month's Low.
Crude Oil is currently traded near a 7 weeks low, at $123.50 a barrel. The main reason for the continuation of the downtrend is most likely to be OPEC decision to increase its output by 200,000 barrels a day. The Organization of the Petroleum Exporting Countries which is in charge of over 40% of the world's oil supply has managed to halt the surging oil prices. Another support for the slipping oil was the seemingly change in U.S foreign policy. U.S approach is now considered to be less aggressive towards Iran, looking to avoid a military conflict, and by so calming investors concerns from another violent episode in the Middle East.
As oil dropped for about $24 a barrel in two weeks, no signs for a solid change are noticeable, and Crude prices are widely expected to further descend
Technical News
EUR/USD
Since the last bearish move, the pair has been consolidating around the 1.5700 level for quite a while now. The hourlies provide bearish signals, suggesting that the restoration of the bearish momentum is due. Going long appears to be preferable today.
GBP/USD
The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
USD/JPY
There is a very distinct bullish channel forming on the daily chart, as the pair is now floating at the top barrier of it. However, the RSI on the one hour chart has peaked at the over-bought zone, and been dropping ever since, suggesting that a bearish move is impending. A bearish cross on the 4 hour chart's Slow Stochastic also supports that notion. Going short with tight stops seems to be a good strategy.
USD/CHF
For the past few days the pair has been floating around 1.0350, with no apparent breach. Now however, new sings for a bearish move are given in the form of a bearish cross on the Slow Stochastic of both the daily and the 4 hour chart. Traders are advised to wait for the break and swing.
The Wild Card
EUR/AUD
The pair is in the midst of a very strong bullish move, as a 'W' shape was formed on the 4 hour chart, suggesting that the bullish move has more steam in it. This might be a great opportunity for forex traders to join a very promising trend.
Indicators
| Date | Time (GMT) | Country | Event | Period | Previous | Forecast | Importance |
|---|---|---|---|---|---|---|---|
| 2008-07-28 | 01:30:00 | AUD | NAB Quarterly Business Confidence | -4 | - | *** | |
| 2008-07-28 | 06:00:00 | EUR | German Consumer Confidence | 3.9 | 3.5 | *** | |
| 2008-07-28 | 16:00:00 | USD | FOMC Member Mishkin Speaks | * | * | *** | |
| 2008-07-28 | 22:45:00 | NZD | Building Consents | m/m | -42.3% | - | *** |
| 2008-07-28 | 23:30:00 | JPY | Overall Household Spending | y/y | -3.2% | -2.8% | * |
| 2008-07-28 | 23:30:00 | JPY | Unemployment Rate | 4.0% | 4.0% | * | |
| 2008-07-28 | 23:50:00 | JPY | Retail Sales | y/y | 0.3% | -0.2% | *** |
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Jollibee Drops by Most in Three Weeks on Philippine Inflation
By Karl Lester M. Yap.
July 28 (Bloomberg) -- Jollibee Foods Corp. fell the most in three weeks in Manila trading on speculation that inflation will hurt earnings at the Philippines' biggest fast-food company.
Jollibee dropped as much as 4 percent to 35.50 pesos on the Philippine Stock Exchange, its biggest decline since July 3.
``Inflation is the more pressing concern as higher prices may deter customers,'' said April Tan, head of research at Citiseconline.com in Manila. The company's sales are still rising, although margins are narrowing, she said, citing discussions with the company.
Inflation may accelerate to almost 12 percent in July, the Philippine Daily Inquirer reported, citing documents from the central bank. Consumer prices rose 11.4 percent in June, the fastest pace in 14 years.
To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net.
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July 28 (Bloomberg) -- Jollibee Foods Corp. fell the most in three weeks in Manila trading on speculation that inflation will hurt earnings at the Philippines' biggest fast-food company.
Jollibee dropped as much as 4 percent to 35.50 pesos on the Philippine Stock Exchange, its biggest decline since July 3.
``Inflation is the more pressing concern as higher prices may deter customers,'' said April Tan, head of research at Citiseconline.com in Manila. The company's sales are still rising, although margins are narrowing, she said, citing discussions with the company.
Inflation may accelerate to almost 12 percent in July, the Philippine Daily Inquirer reported, citing documents from the central bank. Consumer prices rose 11.4 percent in June, the fastest pace in 14 years.
To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net.
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Tele2 Chief May Succeed Ikea's Dahlvig, Dagens Industri Says
By Jakob Lindstroem
July 28 (Bloomberg) -- Tele2 AB Chief Executive Officer Lars-Johan Jarnheimer is a possible candidate to succeed Ikea CEO Anders Dahlvig, who will leave in the next two years, Dagens Industri reported, without saying where it got the information.
Jarnheimer, who has announced his departure at Stockholm- based Tele2, was an apprentice at Ikea and sits on the board of the company controlling Ikea, the newspaper said. None of founder Ingvar Kamprad's three sons will take over from Dahlvig, the newspaper said.
Ikea is the world's largest home-furnishings retailer. Tele2 is Sweden's second-biggest phone company.
To contact the reporter on this story: Jakob Lindstroem in Stockholm at jlindstroem@bloomberg.net.
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July 28 (Bloomberg) -- Tele2 AB Chief Executive Officer Lars-Johan Jarnheimer is a possible candidate to succeed Ikea CEO Anders Dahlvig, who will leave in the next two years, Dagens Industri reported, without saying where it got the information.
Jarnheimer, who has announced his departure at Stockholm- based Tele2, was an apprentice at Ikea and sits on the board of the company controlling Ikea, the newspaper said. None of founder Ingvar Kamprad's three sons will take over from Dahlvig, the newspaper said.
Ikea is the world's largest home-furnishings retailer. Tele2 is Sweden's second-biggest phone company.
To contact the reporter on this story: Jakob Lindstroem in Stockholm at jlindstroem@bloomberg.net.
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Unilever Sells North American Laundry Unit to Vestar
By Jurjen van de Pol and Joram Kanner
July 28 (Bloomberg) -- Unilever, the world's second-biggest consumer-products company, agreed to sell its laundry business in North America to Vestar Capital Partners for $1.45 billion.
Vestar will pay $1.08 billion in cash and $375 million in shares in a new venture it will set up, London- and Rotterdam- based Unilever said today in a Regulatory News Service statement. Vestar will merge the business with its existing Huish Detergents Inc. and form a new company, Sun Products Corp.
Unilever agreed to sell the unit, which makes detergents including All, Wisk and Surf, as part of a plan to dispose of businesses generating 2 billion euros ($3.1 billion) in sales. North American detergents generated $1 billion in revenue last year. The company last week sold some Bertolli brands to Sos Cuetara SA for 630 million euros.
``This is a better-than-expected price,'' said Richard Withagen, an analyst at SNS Securities with an ``accumulate'' rating. ``The company's disposal program is doing very well. They're getting good prices for their assets in a difficult economic environment.''
The company will continue to sell detergent outside of North America and will focus on markets where it has a ``leading position,'' it said.
Separately, Unilever spokesman Trevor Gorin said the company is moving some of its research and development to India and China. He was responding to a report in today's Economic Times.
``These markets are going to be hugely important to us,'' Gorin said. He declined to comment on a Sunday Times report that Chief Executive Officer Patrick Cescau has told the board he would step down in May of next year.
To contact the reporter on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.net
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July 28 (Bloomberg) -- Unilever, the world's second-biggest consumer-products company, agreed to sell its laundry business in North America to Vestar Capital Partners for $1.45 billion.
Vestar will pay $1.08 billion in cash and $375 million in shares in a new venture it will set up, London- and Rotterdam- based Unilever said today in a Regulatory News Service statement. Vestar will merge the business with its existing Huish Detergents Inc. and form a new company, Sun Products Corp.
Unilever agreed to sell the unit, which makes detergents including All, Wisk and Surf, as part of a plan to dispose of businesses generating 2 billion euros ($3.1 billion) in sales. North American detergents generated $1 billion in revenue last year. The company last week sold some Bertolli brands to Sos Cuetara SA for 630 million euros.
``This is a better-than-expected price,'' said Richard Withagen, an analyst at SNS Securities with an ``accumulate'' rating. ``The company's disposal program is doing very well. They're getting good prices for their assets in a difficult economic environment.''
The company will continue to sell detergent outside of North America and will focus on markets where it has a ``leading position,'' it said.
Separately, Unilever spokesman Trevor Gorin said the company is moving some of its research and development to India and China. He was responding to a report in today's Economic Times.
``These markets are going to be hugely important to us,'' Gorin said. He declined to comment on a Sunday Times report that Chief Executive Officer Patrick Cescau has told the board he would step down in May of next year.
To contact the reporter on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.net
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IBM Agrees to Buy French Software Maker ILOG for EU215 Million
By Lars Klemming
July 28 (Bloomberg) -- International Business Machines Corp., the world's second-biggest software maker, agreed to buy French business software designer ILOG SA for 215 million euros ($337 million).
IBM offered 10 euros cash for each ILOG share, 37 percent more than the closing price on July 25. ILOG's software will allow IBM to help customers deliver business information in real- time so they can make ``better business decisions faster,'' the Armonk, New York-based IBM said today in a Market Wire statement. ILOG is based in Gentilly near Paris.
To contact the reporter on this story: Lars Klemming in Stockholm at lklemming@bloomberg.net
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July 28 (Bloomberg) -- International Business Machines Corp., the world's second-biggest software maker, agreed to buy French business software designer ILOG SA for 215 million euros ($337 million).
IBM offered 10 euros cash for each ILOG share, 37 percent more than the closing price on July 25. ILOG's software will allow IBM to help customers deliver business information in real- time so they can make ``better business decisions faster,'' the Armonk, New York-based IBM said today in a Market Wire statement. ILOG is based in Gentilly near Paris.
To contact the reporter on this story: Lars Klemming in Stockholm at lklemming@bloomberg.net
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China Telecom to Spend $11.7 Billion on Mobile Unit From Unicom
By Mark Lee and John Liu
July 28 (Bloomberg) -- China Telecom Corp., the nation's biggest fixed-line telephone carrier, said its parent will spend 80 billion yuan ($11.7 billion) to add base stations and switches to the mobile-phone business it's buying from China Unicom Ltd.
China Telecommunications Corp. will spend the money over the next three years, China Telecom said in a statement distributed at a briefing in Hong Kong today. China Telecom and its parent are paying 110 billion yuan for Unicom's wireless business based on the code division multiple access technology.
To contact the reporters on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net; John Liu in Shanghai at jliu42@bloomberg.net.
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July 28 (Bloomberg) -- China Telecom Corp., the nation's biggest fixed-line telephone carrier, said its parent will spend 80 billion yuan ($11.7 billion) to add base stations and switches to the mobile-phone business it's buying from China Unicom Ltd.
China Telecommunications Corp. will spend the money over the next three years, China Telecom said in a statement distributed at a briefing in Hong Kong today. China Telecom and its parent are paying 110 billion yuan for Unicom's wireless business based on the code division multiple access technology.
To contact the reporters on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net; John Liu in Shanghai at jliu42@bloomberg.net.
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Yahoo Japan Rises on Profit Gain, Analyst Ratings
By Akiko Ikeda
July 28 (Bloomberg) -- Yahoo Japan Corp., the operator of Japan's most visited Internet portal, rose to the highest in more than two weeks after profit rose and analysts raised their ratings on the stock.
Yahoo Japan shares gained 1,650 yen, or 4.1 percent, to 41,650 yen, at the 11 a.m. break of morning trade on the Tokyo Stock Exchange, the highest since July 10. The company had the fourth-largest advance on the Nikkei 225 Stock Average.
Net income for the three months ended June 30 rose to 19.2 billion yen ($177 million) from 16.2 billion yen a year earlier on a 16 percent gain in sales, the Tokyo-based company said in a release to the exchange on July 25. It cited increased revenue from advertising and profit from new subsidiary Overture KK.
``The results exemplified a company performing well under adverse conditions,'' KBC Securities analyst Hiroshi Kamide wrote in a report dated July 25. ``The key positive was the Overture search advertising business, which continues to grow, where Yahoo Japan is creating operational gearing.''
Revenue from behavior targeting advertisements, those based on users' track records and which provide advertisements to meet their demands, increased to 28.7 billion yen, a 37 percent gain in its operating margin ratio, according to company spokeswoman Maki Koizumi.
`Relatively Good'
``First-quarter profit reached the level we had expected; relatively good results in the advertisement business,'' Koizumi said by phone today. ``The slowing economy affected recruitment and real estate services. Revenue from the businesses declined as the level of posted information fell.''
Kamide raised his rating to ``buy'' from ``hold'' on July 25. Takayoshi Koike, an analyst at Deutsche Bank AG, lifted his rating on the company to ``hold'' from ``sell'' on the day, while maintaining a 12-month price estimate at 40,000 yen.
The company will retire 2.01 percent of its shares on Aug. 8, Yahoo said in a separate statement. The stock has declined 17 percent this year, compared with a 12 percent drop in the benchmark Topix index.
To contact the reporter on the story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net
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Northern Foods Sales Meet Forecast Following Price Increases
By Eleanor Green
July 28 (Bloomberg) -- Northern Foods Plc, the largest U.K. maker of prepared meals, said first-quarter sales met forecasts after the company passed on surging costs for ingredients through price increases.
Revenue rose 7.6 percent in the 13 weeks to June 28, the Leeds, England-based company said today in a PRNewswire statement, as average selling prices increased by 5.5 percent, offsetting a 2 percent decline in sales by volume.
Northern, the maker of Fox's cookies, maintained its forecast for annual sales. Surging expenses for wheat, milk and other commodities have raised costs across the food industry, pushing producers to negotiate higher prices with retailers. At the same time, a slowing economy has hurt food sales at Marks and Spencer Group Plc, which generates about a quarter of Northern's revenue, according to Citigroup Inc.
``The market environment remains challenging but we continue to invest in our brands and own label business, and at the same time drive greater efficiencies,'' Chief Executive Officer Stefan Barden said in the statement. ``We have a strong balance sheet and a robust business model, leaving us well positioned to succeed in difficult market conditions.''
To contact the reporter on this story: Eleanor Green in London egreen15@bloomberg.net.
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July 28 (Bloomberg) -- Northern Foods Plc, the largest U.K. maker of prepared meals, said first-quarter sales met forecasts after the company passed on surging costs for ingredients through price increases.
Revenue rose 7.6 percent in the 13 weeks to June 28, the Leeds, England-based company said today in a PRNewswire statement, as average selling prices increased by 5.5 percent, offsetting a 2 percent decline in sales by volume.
Northern, the maker of Fox's cookies, maintained its forecast for annual sales. Surging expenses for wheat, milk and other commodities have raised costs across the food industry, pushing producers to negotiate higher prices with retailers. At the same time, a slowing economy has hurt food sales at Marks and Spencer Group Plc, which generates about a quarter of Northern's revenue, according to Citigroup Inc.
``The market environment remains challenging but we continue to invest in our brands and own label business, and at the same time drive greater efficiencies,'' Chief Executive Officer Stefan Barden said in the statement. ``We have a strong balance sheet and a robust business model, leaving us well positioned to succeed in difficult market conditions.''
To contact the reporter on this story: Eleanor Green in London egreen15@bloomberg.net.
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Advantest Shares Fall on Forecast for First-Half Loss
By Pavel Alpeyev
July 28 (Bloomberg) -- Advantest Corp., the world's biggest maker of memory-chip testers, fell the most in four months in Tokyo trading after the company forecast a loss in the first half on scaled-back investment in factories by chipmakers.
Advantest slid 6.1 percent to close at 2,170 yen on the Tokyo Stock Exchange, the biggest decline since March 3. Macquarie Group Ltd. reduced its 12-month price estimate 12 percent to 1,450 yen, citing slumping orders.
The first-half loss will probably be 2.5 billion yen ($23.1 million), Advantest said after the market closed on July 25, compared with a 16.9 billion yen profit for the same period a year earlier. Orders, an indicator of future sales, in the period will decline 62 percent to 36 billion yen, after plummeting 66 percent in the first quarter, it said.
The company didn't give a full-year outlook, citing difficulty in forecasting spending by chipmakers amid a glut that has caused companies such as Samsung Electronics Co. to report weaker earnings from semiconductors. Morgan Stanley and Nomura Holdings Inc. predict losses at makers of computer memory chips will continue this quarter as prices fall.
``It is looking increasingly likely Advantest will post a full-year loss'' as orders shrink, Hideyuki Maekawa, a Tokyo- based analyst at Credit Suisse Group, wrote in a July 25 report.
Sales in the first half will drop 57 percent to 50 billion yen, after declining 54 percent to 26.5 billion yen in the first quarter, the Tokyo-based company said.
Advantest reported a net loss of 152 million yen for the three months to June 30, compared with profit of 9.95 billion yen a year earlier.
To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.
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Mitsubishi Electric's First-Quarter Profit Rises 19%
By Pavel Alpeyev
July 28 (Bloomberg) -- Mitsubishi Electric Corp., a Japanese maker of consumer electronics, factory machinery and elevators, said fiscal first-quarter profit rose 19 percent, helped by sales of audio-visual products.
Net income increased to 55.3 billion yen ($512 million) in the three months ended June 30, from 46.5 billion yen a year earlier, Mitsubishi Electric said in a statement to the Tokyo Stock Exchange today. Sales gained 0.7 percent to 879 billion yen.
Mitsubishi Electric shares rose as much as 3.4 percent in Tokyo trading after the earnings announcement. The Tokyo-based company, which generates more than 30 percent of sales overseas, maintained its April forecast for full-year profit and revenue to be little changed because of worsening global economic conditions and rising raw material prices.
The stock gained 1.7 percent to 1,084 yen as of 1:39 p.m. on the Tokyo Stock Exchange. The shares have lost 7.5 percent this year, compared with a 13 percent drop for the benchmark Nikkei 225 Stock Average.
To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.
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July 28 (Bloomberg) -- Mitsubishi Electric Corp., a Japanese maker of consumer electronics, factory machinery and elevators, said fiscal first-quarter profit rose 19 percent, helped by sales of audio-visual products.
Net income increased to 55.3 billion yen ($512 million) in the three months ended June 30, from 46.5 billion yen a year earlier, Mitsubishi Electric said in a statement to the Tokyo Stock Exchange today. Sales gained 0.7 percent to 879 billion yen.
Mitsubishi Electric shares rose as much as 3.4 percent in Tokyo trading after the earnings announcement. The Tokyo-based company, which generates more than 30 percent of sales overseas, maintained its April forecast for full-year profit and revenue to be little changed because of worsening global economic conditions and rising raw material prices.
The stock gained 1.7 percent to 1,084 yen as of 1:39 p.m. on the Tokyo Stock Exchange. The shares have lost 7.5 percent this year, compared with a 13 percent drop for the benchmark Nikkei 225 Stock Average.
To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.
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SDI Posts First Profit in Seven Quarters on Batteries
By Kevin Cho
July 28 (Bloomberg) -- Samsung SDI Co., the world's second- largest maker of plasma displays, posted its first profit in seven quarters as record sales from rechargeable batteries offset falling prices of flat screens.
Second-quarter net income was 49.6 billion won ($49 million), compared with a loss of 138.1 billion won a year earlier, Suwon, South Korea-based SDI said today in a statement. Profit beat the 300 million won loss median estimate of seven analysts surveyed by Bloomberg. Sales rose 43 percent to 1.64 trillion won.
SDI said this month it's reorganizing its unprofitable display operations as the company shifts its focus on rechargeable batteries, its only profitable business. The company plans to boost spending for the battery division and last month agreed to form a venture with Robert Bosch GmbH to produce batteries for hybrid cars from 2010.
``With the restructuring, the company's earnings visibility has become clearer and expanding the battery business seems to be a positive move,'' said Jeff Kim, an analyst at Hyundai Securities Co. ``SDI will have new opportunities.''
Samsung SDI shares rose 0.2 percent to close at 84,300 won on the Korea Exchange, after earlier falling as much as 3.3 percent before the company reported earnings.
Including overseas affiliates, operating profit, or sales minus the cost of goods sold and administrative expenses, was 10.8 billion won, compared with a loss of 137.4 billion won a year earlier. Analysts in the survey projected an operating loss of 10.3 billion won.
Battery Boost
SDI's battery shipments rose 36 percent on demand from notebook computers, the company said today. SDI maintained its forecast that second-half industry demand for lithium-ion batteries will rise 20 percent from the first six months.
Average prices of SDI's batteries probably rose 47 percent in the second quarter because of a supply shortage, according to James Kim, an analyst at Lehman Brothers Holdings Inc. in Seoul.
SDI said today its share of the rechargeable battery market will rise to 19 percent this year from 16 percent in 2007 and raised its shipment target of lithium-ion batteries by 3.9 percent to 530 million cells for 2008.
In May, SDI said it will invest 106.8 billion won to boost production of batteries to meet demand. SDI will set up a venture with Bosch in September and the two companies plan to jointly invest about $500 million in the entity named SB LiMotive over the next five years.
The company plans to boost sales to 10 trillion won by 2013, driven by its battery division and expanding into fuel cell and solar cell businesses, SDI said in a statement today.
Plasma Losses
SDI posted a record loss in 2007 as prices of plasma screens declined on competition from brighter liquid-crystal displays. LG Display Co., the second-largest LCD maker, and Taiwan's AU Optronics Corp. this month reported higher profits as demand for computer screens drove up prices.
Average prices of SDI's plasma panels probably fell by 18 percent in the second quarter from a year earlier, according to Lehman's Kim. Prices will decline 18 percent this year after sliding 31 percent in 2007, according to Kim.
Intensifying competition with LCDs will probably keep SDI's plasma panel business unprofitable until the current period, according to J.J. Park, an analyst at JPMorgan Chase & Co., said last month.
Samsung Electronics Co., the world's largest maker of flat- screen televisions and the largest shareholder of SDI, said this month it will manage SDI's plasma-display operations as part of a reorganization of the unprofitable business.
Organic Screens
SDI is also betting on so-called active-matrix organic light emitting diode screens to improve earnings. SDI, the world's largest maker of organic displays, plans to double production of AM-OLED screens this year after beginning production in October.
Last week, Samsung Electronics and SDI said they agreed to form a venture to jointly make organic displays. SDI will spin off its AM-OLED operations to set up Samsung Mobile Display and Samsung Electronics plans to invest 938.5 billion won for a 50 percent stake in the venture.
Separately, SDI said last month it plans to invest about 552 billion won until June 2009 to increase production of the organic screens. AM-OLED displays are brighter, thinner and use less power than liquid-crystal displays, according to SDI.
To contact the reporter on this story: Kevin Cho in Seoul at kcho2@bloomberg.net
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July 28 (Bloomberg) -- Samsung SDI Co., the world's second- largest maker of plasma displays, posted its first profit in seven quarters as record sales from rechargeable batteries offset falling prices of flat screens.
Second-quarter net income was 49.6 billion won ($49 million), compared with a loss of 138.1 billion won a year earlier, Suwon, South Korea-based SDI said today in a statement. Profit beat the 300 million won loss median estimate of seven analysts surveyed by Bloomberg. Sales rose 43 percent to 1.64 trillion won.
SDI said this month it's reorganizing its unprofitable display operations as the company shifts its focus on rechargeable batteries, its only profitable business. The company plans to boost spending for the battery division and last month agreed to form a venture with Robert Bosch GmbH to produce batteries for hybrid cars from 2010.
``With the restructuring, the company's earnings visibility has become clearer and expanding the battery business seems to be a positive move,'' said Jeff Kim, an analyst at Hyundai Securities Co. ``SDI will have new opportunities.''
Samsung SDI shares rose 0.2 percent to close at 84,300 won on the Korea Exchange, after earlier falling as much as 3.3 percent before the company reported earnings.
Including overseas affiliates, operating profit, or sales minus the cost of goods sold and administrative expenses, was 10.8 billion won, compared with a loss of 137.4 billion won a year earlier. Analysts in the survey projected an operating loss of 10.3 billion won.
Battery Boost
SDI's battery shipments rose 36 percent on demand from notebook computers, the company said today. SDI maintained its forecast that second-half industry demand for lithium-ion batteries will rise 20 percent from the first six months.
Average prices of SDI's batteries probably rose 47 percent in the second quarter because of a supply shortage, according to James Kim, an analyst at Lehman Brothers Holdings Inc. in Seoul.
SDI said today its share of the rechargeable battery market will rise to 19 percent this year from 16 percent in 2007 and raised its shipment target of lithium-ion batteries by 3.9 percent to 530 million cells for 2008.
In May, SDI said it will invest 106.8 billion won to boost production of batteries to meet demand. SDI will set up a venture with Bosch in September and the two companies plan to jointly invest about $500 million in the entity named SB LiMotive over the next five years.
The company plans to boost sales to 10 trillion won by 2013, driven by its battery division and expanding into fuel cell and solar cell businesses, SDI said in a statement today.
Plasma Losses
SDI posted a record loss in 2007 as prices of plasma screens declined on competition from brighter liquid-crystal displays. LG Display Co., the second-largest LCD maker, and Taiwan's AU Optronics Corp. this month reported higher profits as demand for computer screens drove up prices.
Average prices of SDI's plasma panels probably fell by 18 percent in the second quarter from a year earlier, according to Lehman's Kim. Prices will decline 18 percent this year after sliding 31 percent in 2007, according to Kim.
Intensifying competition with LCDs will probably keep SDI's plasma panel business unprofitable until the current period, according to J.J. Park, an analyst at JPMorgan Chase & Co., said last month.
Samsung Electronics Co., the world's largest maker of flat- screen televisions and the largest shareholder of SDI, said this month it will manage SDI's plasma-display operations as part of a reorganization of the unprofitable business.
Organic Screens
SDI is also betting on so-called active-matrix organic light emitting diode screens to improve earnings. SDI, the world's largest maker of organic displays, plans to double production of AM-OLED screens this year after beginning production in October.
Last week, Samsung Electronics and SDI said they agreed to form a venture to jointly make organic displays. SDI will spin off its AM-OLED operations to set up Samsung Mobile Display and Samsung Electronics plans to invest 938.5 billion won for a 50 percent stake in the venture.
Separately, SDI said last month it plans to invest about 552 billion won until June 2009 to increase production of the organic screens. AM-OLED displays are brighter, thinner and use less power than liquid-crystal displays, according to SDI.
To contact the reporter on this story: Kevin Cho in Seoul at kcho2@bloomberg.net
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Pearson First-Half Loss Narrows From a Year Earlier
By Simon Thiel and Kristen Schweizer
July 28 (Bloomberg) -- Pearson Plc, the publisher of the Financial Times newspaper, said its first-half loss narrowed from a year earlier as sales rose and the company recorded a smaller deficit from discontinued operations.
The loss for the period was 62 million pounds ($123 million), from a loss of 104 million pounds a year earlier, the London-based company said in an e-mailed statement today. Pretax profit rose 57 percent to 55 million pounds while sales climbed 16 percent to 1.97 billion pounds.
Pearson, which has most of its sales in the second half because of the ``seasonal phasing'' of the company's education and consumer book business, predicted further growth this year.
``In spite of the macroeconomic conditions, we are on track to make further progress on our financial goals and our strong trading performance has increased our confidence in the full-year outlook,'' according to the statement.
Chief Executive Officer Marjorie Scardino has sold assets such as foreign-language newspapers to focus on the Financial Times and its education business, which publishes textbooks and provides testing for nurses, business-school students and stockbrokers. Last year, Pearson bought online course company eCollege.com for $538 million and sold its French newspaper Les Echos for 240 million euros to LVMH Moet Hennessy Louis Vuitton SA.
The median estimate by four analysts in a Bloomberg survey was for pretax profit of 54.2 million pounds in the first half, while five analysts had a median estimate for sales of 1.84 billion pounds. The company raised its interim dividend 6.3 percent to 11.8 pence a share.
`Good Start'
On April 25, Pearson said it had a ``good start'' to 2008, helped by advertising revenue and educational publishing. The company also said at the time it was ``seeing healthy demand for instructional materials and educational services and our businesses are performing well competitively.''
North America accounts for about two thirds of Pearson's sales, and the collapse in the U.S. housing market is rippling through the economy. Investors are growing concerned that U.S. states will cut their spending on textbooks as their finances worsen, analysts said.
Pearson has spent more than $8.8 billion buying education assets since 1997, including Simon & Schuster textbooks and Harcourt Education's international business. She sold Madame Tussaud's waxwork museum and a stake in television broadcaster British Sky Broadcasting Group Plc, and agreed in February to sell Pearson's 50 percent stake in the German-language version of the Financial Times.
Bloomberg LP, the owner of Bloomberg News, competes with Pearson in providing information to the financial industry.
To contact the reporter on this story: Simon Thiel in London at sthiel1@bloomberg.net and Kristen Schweizer in London at kschweizer1@bloomberg.net;
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July 28 (Bloomberg) -- Pearson Plc, the publisher of the Financial Times newspaper, said its first-half loss narrowed from a year earlier as sales rose and the company recorded a smaller deficit from discontinued operations.
The loss for the period was 62 million pounds ($123 million), from a loss of 104 million pounds a year earlier, the London-based company said in an e-mailed statement today. Pretax profit rose 57 percent to 55 million pounds while sales climbed 16 percent to 1.97 billion pounds.
Pearson, which has most of its sales in the second half because of the ``seasonal phasing'' of the company's education and consumer book business, predicted further growth this year.
``In spite of the macroeconomic conditions, we are on track to make further progress on our financial goals and our strong trading performance has increased our confidence in the full-year outlook,'' according to the statement.
Chief Executive Officer Marjorie Scardino has sold assets such as foreign-language newspapers to focus on the Financial Times and its education business, which publishes textbooks and provides testing for nurses, business-school students and stockbrokers. Last year, Pearson bought online course company eCollege.com for $538 million and sold its French newspaper Les Echos for 240 million euros to LVMH Moet Hennessy Louis Vuitton SA.
The median estimate by four analysts in a Bloomberg survey was for pretax profit of 54.2 million pounds in the first half, while five analysts had a median estimate for sales of 1.84 billion pounds. The company raised its interim dividend 6.3 percent to 11.8 pence a share.
`Good Start'
On April 25, Pearson said it had a ``good start'' to 2008, helped by advertising revenue and educational publishing. The company also said at the time it was ``seeing healthy demand for instructional materials and educational services and our businesses are performing well competitively.''
North America accounts for about two thirds of Pearson's sales, and the collapse in the U.S. housing market is rippling through the economy. Investors are growing concerned that U.S. states will cut their spending on textbooks as their finances worsen, analysts said.
Pearson has spent more than $8.8 billion buying education assets since 1997, including Simon & Schuster textbooks and Harcourt Education's international business. She sold Madame Tussaud's waxwork museum and a stake in television broadcaster British Sky Broadcasting Group Plc, and agreed in February to sell Pearson's 50 percent stake in the German-language version of the Financial Times.
Bloomberg LP, the owner of Bloomberg News, competes with Pearson in providing information to the financial industry.
To contact the reporter on this story: Simon Thiel in London at sthiel1@bloomberg.net and Kristen Schweizer in London at kschweizer1@bloomberg.net;
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India May Increase Key Rate for Third Time Since June
By Cherian Thomas
July 28 (Bloomberg) -- India's central bank may raise interest rates for the third time in less than two months to combat inflation running at a 13-year high.
The Reserve Bank of India will increase the benchmark repurchase rate to 8.75 percent from 8.5 percent, according to 16 of 22 economists in a Bloomberg News survey. The bank, which will release its quarterly monetary policy tomorrow at noon in Mumbai, will also raise the cash reserve ratio to 9 percent from 8.75 percent, 10 of 21 economists said.
Governor Yaga Venugopal Reddy, whose term at the Reserve Bank ends in September, is intensifying efforts to cool inflation that has accelerated to more than double his goal. Prime Minister Manmohan Singh, fresh from winning last week's confidence vote, is looking to Reddy to spearhead the fight against rising prices as he prepares for elections before May.
``We expect another rate hike,'' said Krishnamoorthy Ramanathan, who manages $1.9 billion in Indian debt at ING Investment Management Pvt. in Mumbai. ``The government has exhausted fiscal measures and hence is relying on monetary policy to bring inflation under control.''
India's key wholesale price inflation has accelerated to 11.89 percent even as the government cut import duties on edible oils, steel products and gasoline, foregoing revenue. The government also banned the export of corn, pulses, rice, wheat and edible oil to spur local supplies.
`Fiscal Headroom'
Standard & Poor's said this month that India's BBB- credit rating, the lowest investment grade, may be cut to junk if faster inflation and higher government spending ahead of the election widens the budget deficit.
``The fiscal headroom available to relieve the inflation stress is fast reducing,'' said Shuchita Mehta, senior economist at Standard Chartered Bank in Mumbai. ``A higher budget deficit not only will crowd out private investment, but also is likely to be inflationary.''
Still, India's 10-year government bonds rose after crude oil declined for a third week, tempering speculation the central bank will raise interest rates tomorrow to curb inflation. The yield fell 8 basis points to 9.07 percent as of 10:00 a.m. in Mumbai, according to the central bank.
A four-week slide in India's interest-rate swaps shows investors pared bets the central bank will raise borrowing costs, according to ICICI Securities Ltd. and Kotak Mahindra Bank Ltd. The five-year swap rate, a fixed payment made to receive floating rates, is headed for the biggest monthly decline in more than five years.
Wrong-Footed
Reddy, who has been tightening monetary policy since 2004, was caught wrong-footed as inflation in India surged in the past two months after the government was forced to increase energy prices by as much as 17 percent to cut losses at refiners.
Since June, Reddy has raised rates by 75 basis points and the cash reserve ratio by half a percentage point. The governor is trying to discourage lending from banks that could stoke consumer demand and add to inflation fanned mainly by higher prices of oil. Money supply is growing at about 21 percent, more than the central bank's 17 percent target.
Faster inflation is prompting other Asian central banks to also increase interest rates. The Philippine central bank has raised rates at its last two meetings, while Bank Indonesia has boosted borrowing costs for three straight months.
Reddy has also had to contend with a weakening rupee this year, which has pushed up the cost of imported goods.
Slower Growth
India's $912 billion economy may grow as little as 8 percent this year, Reddy estimates. The rupee has weakened 8.3 percent and the benchmark stock index fell by a third since January. The yield on India's benchmark 10-year bonds has gained 91 basis points this year on inflation expectations.
Prime Minister Singh extended his four-year tenure last week by proving his majority in parliament after his main ally, the communist parties, withdrew support on opposition to a nuclear energy accord pursued by the government with the U.S.
By averting early elections, Singh, who has suffered electoral reverses in nine of the past 11 state polls, has won more time to gain control over inflation.
Singh may succeed in reining in inflation before the national elections if oil prices, which have dropped 13 percent in the past two weeks, sustain their downward trend. India imports 70 percent of its oil requirement.
Lehman Brothers Holdings Inc. expects India's inflation rate to start falling ``decisively'' from January, based on their assumption that growth will slow to 7.3 percent this year and the price of oil drops to $90 a barrel in the first quarter of 2009.
``Our inflation pulse measure is starting to turn, but pressure on producers to pass on input costs remain heavy,'' said Sonal Varma, a Mumbai-based economist at Lehman. ``A rate hike will help anchor inflation expectations.''
India's Rate Forecasts
--------------------------------------------------------------
Cash
Reverse Reserve
Company Repo Rate Repo Ratio
--------------------------------------------------------------
Median 8.75% 6.00% 9.00%
% estimates at Median 72.73% 100.00% 47.62%
High 9.00% 6.00% 9.25%
Low 8.50% 6.00% 8.75%
Number of Estimates 22 22 21
--------------------------------------------------------------
ABN Amro Bank 8.75% 6.00% 8.75%
Anand Rathi Securities 8.50% 6.00% 9.25%
Axis Bank Ltd. 8.50% 6.00% 8.75%
CARE Ratings 8.50% 6.00% 8.75%
CRISIL Ltd. 8.75% 6.00% 9.00%
Dun & Bradstreet Info. 8.75% 6.00% 9.00%
Edelweiss Securities 8.75% 6.00% 9.00%
Forecast Singapore 8.75% 6.00% 8.75%
HSBC Singapore 8.75% 6.00% 9.00%
ICICI Securities 8.75% 6.00% 8.75%
IDBI Gilts Ltd. 8.75% 6.00% 9.00%
ING Groep NV 8.75% 6.00% 9.00%
ING Investment Mgmt. 8.75% 6.00% 8.75%
JPMorgan Chase Bank 9.00% 6.00% 9.00%
Kotak Mahindra Bank 8.75% 6.00% 8.75%
Kotak Securities Ltd. 8.75% 6.00% 8.75%
Lehman Brothers* 8.75% 6.00% --
Moody's Economy.com Inc. 8.75% 6.00% 9.00%
Securities Trading Corp. Of India 8.50% 6.00% 9.00%
Sundaram BNP Paribas Asset Mang. 8.75% 6.00% 8.75%
Westpac Banking 8.75% 6.00% 9.00%
Yes Bank 8.50% 6.00% 8.75%
--------------------------------------------------------------
Note: * Lehman Brothers expect CRR to be at 9.25% by
September 2008.
To contact the reporter on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net
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